The new scope of the project will see V/Line intercity trains and long-distance V/Line coach services go without the ticketing system. The ticketing system will still be used in Melbourne and on V/Line's commuter belt to Geelong, Ballarat, Bendigo, Seymour and Traralgon. However, trams will operate without smart-card ticket vending machines once Metcard equipment is removed.

"The costs of paying out the existing contract, removing the existing system infrastructure and funding a new system would be far higher than the funding required to make myki work," said Baillieu.

He said that the government had been meeting with NTT Data to avoid a repeat of myki's poor project performance.

"Improved project management governance and key performance measures will be a key part of the revised ticketing contract," he said.

In addition, the government will appoint a third-party certifier to oversee the remaining build phase and a rigorous testing and project oversight regime that will report during critical evaluation points.

The announcement today would enable final negotiations for the revised contract to proceed with the local subsidiary, according to the minister.

"Many problems with the myki ticketing system originated with the inadequate contract the Brumby Labor Government entered into which did not include appropriate governance, project management or financial controls for a project of this size and complexity," Mulder said.

Metcard operations are expected to continue until the end of 2012, if the government's negotiations go to plan. This will ensure that the myki system is working reliably before Metcard is phased out completely.